Gold prices (XAU/USD) have slightly recovered after a recent three-day drop, rebounding from lows near $2,590. This modest gain is partly due to a weaker stock market, which supports gold as a safe-haven investment. However, any significant rise in gold remains limited by a strong US Dollar (USD), which benefits from high Treasury yields. The upcoming US inflation report (CPI) will be crucial for traders, as it may influence the Federal Reserve’s (Fed) interest rate decisions, impacting gold’s path forward.
Gold Prices Steady Despite a Strong US Dollar
Gold prices have held steady even as the USD continues to rise. The USD has been gaining strength from new US economic policies expected under President-elect Donald Trump, which are likely to increase inflation. Higher inflation could make the Fed more cautious about cutting interest rates aggressively. This poses a challenge for gold, as a stronger USD generally limits gold’s appeal since it does not yield interest.
With the US inflation report coming up, traders are taking a wait-and-see approach. This report will provide insights on rising prices and will influence the Fed’s rate plans, which could impact gold’s future movement.
Investors Look to US Inflation Data for Hints on Fed Rate Plans and Gold’s Path
On Tuesday, the USD reached new highs, driving gold prices below the $2,600 level for the first time since September. Optimism around US policies is expected to put pressure on inflation, making it less likely that the Fed will cut rates significantly in the near term.
Recent remarks from Richmond Fed President Tom Barkin suggest inflation could stay uncertain, possibly remaining above the Fed’s 2% target. Similarly, Minneapolis Fed President Neel Kashkari mentioned that any unexpected rise in inflation before the December Fed meeting could make the Fed hold back on rate cuts. With the CPI report ahead, traders are focused on how it might influence the Fed’s strategy and, in turn, affect gold prices.
Key Technical Levels for Gold Price
Technically, gold’s slight rebound has not yet breached the $2,630 level. Indicators suggest further downward pressure unless strong support levels are confirmed.
If gold falls below $2,600, more selling could follow. The next support level sits around $2,540, where the 100-day Simple Moving Average (SMA) and 50% Fibonacci retracement meet, which may help limit further declines. However, if gold moves above $2,655, it may signal a stronger recovery trend.
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